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White House Distances Itself from Big Tax Cut for the Wealthy

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The New York Times reported Monday that the Trump administration was considering bypassing Congress to enact another big tax cut that would mainly benefit the wealthy. The White House pushed back on the report Tuesday, saying that it wasn’t actively reviewing any such plan at this time.

Nevertheless, the idea that Treasury Secretary Steven Mnuchin said his department was studying — indexing capital gains taxes to inflation — has long been popular with conservatives, including Larry Kudlow, the president’s top economic adviser. There’s a good chance we’ll hear about it again, perhaps after the fall elections.

Mnuchin told the Times’ Alan Rappeport and Jim Tankersley earlier this month that his department was trying to determine if it has the legal authority to make such a change in the absence of legislation from Congress, and the White House confirmed Tuesday that the analysis continues.

“Treasury is currently evaluating the economic impact and whether it can be achieved without legislation,” said Lindsay Walters, a White House spokeswoman.

Here are some basics on inflation indexing, should the Treasury Department decide to pursue it further:

How it would work. Currently, investors use the nominal price they paid for an asset when reporting capital gains or losses to the IRS after a sale. Indexing would mean that the price paid could be adjusted for inflation, reducing the profit involved when the asset is sold, thereby reducing the taxes owed. For example, if you bought a share of stock for $100 in 1980 and sold it for $400 this year, you’d owe taxes on the $300 gain. Using indexing, the purchase price would be about $320, meaning you’d only owe taxes on some $80 in gains.

How much money is involved? Allowing indexing for capital gains would cost the U.S. about $100 billion over 10 years, according to an analysis done earlier this year by John Ricco of the Penn Wharton Budget Model.

Who would benefit? The great majority of capital gains are reported by upper-income households, so the benefits would accrue largely to the wealthy. The chart below from The Washington Post illustrates Ricco’s data, which shows that the top 1 percent of households would claim more than 86 percent of the reduced taxes. As with virtually all tax cuts, conservatives argue that indexing capital gains would encourage more asset sales and boost economic growth.

What’s the holdup? The Trump administration may not want to associate itself with what many are calling more tax cuts for the rich ahead of the midterm elections. And there are fundamental constitutional issues, since it’s not clear that the Treasury has the legal authority to make such a change. President George H. W. Bush’s administration considered the issue in 1992 and concluded that the Treasury could not unilaterally impose indexing, but such a move has never been tested in court. 

 
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Hey .01 percenters give us your thoughts. I think I can guess what the 95 percent will think.
B/A

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Trump administration considers new tax cut for the wealthy

The Treasury Department is considering a tax cut for the wealthiest Americans through a change that would not need approval from Congress, officials said, a move that would follow a package of tax cuts last year that also benefited the super-rich.

The agency is studying whether to allow investment income, known as capital gains, to be adjusted for inflation in a way that shields more of it from taxation. Most capital gains are paid by wealthier Americans, who disproportionately hold large portfolios of investments.

 
 

But the use of executive power on such a significant change to the tax law would be highly unusual and could be vulnerable to a legal challenge. Senior administration officials have discussed whether to proceed but have not concluded they have legal authority to do so.

The move was rejected during the George H.W. Bush administration because it was seen as outside the scope of the Treasury Department's authority and only attainable via an act of Congress.

 

The idea has long been advocated by White House National Economic Council Director Larry Kudlow, but tax changes this drastic are typically made by Congress, not the Treasury and Internal Revenue Service. Still, Treasury Secretary Steven Mnuchin told the New York Times in an interview that he was reviewing whether to move ahead if Congress doesn't act on its own.

"If it can't get done through a legislation process, we will look at what tools at Treasury we have to do it on our own and we'll consider that," Mnuchin told the newspaper. "We are studying that internally, and we are also studying the economic costs and the impact on growth."

Mnuchin made clear that he had not decided whether he would approve such a change. And he has not determined whether he believes that the change would be legal, two senior administration officials said, speaking on the condition of anonymity to discuss the internal deliberations.

Republicans passed a massive package of tax cuts last year that lowered the tax rate for all income groups, with big benefits going to wealthy Americans and businesses. Despite mounting worries from lawmakers about the growing federal deficit, Trump said earlier this year that Congress was going to try to pass another package of tax cuts this year that would be largely targeted at helping the middle class.

"Once again, Republicans have exposed the true priorities of their tax scam: billions in tax breaks for the wealthiest at the expense of everyone else," House Minority Leader Nancy Pelosi (D-San Francisco) said in a statement. "American families are drowning under the weight of stagnant wages, higher health costs and soaring prescription drug costs, but the GOP continues to pick their pockets to give more handouts to the wealthiest 1 percent."

Capital gains represents the income someone receives from an investment over time. If an investor buys a stock for $100,000 and sells it later for $110,000, they have a capital gain of $10,000 and typically must pay a tax on that difference.

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Donald Trump’s administration is considering a tax cut worth $100 billion that would mainly benefit the well off and be delivered without legislation, it emerged on Tuesday. 

The US Treasury is looking at whether to allow people to take account of inflation when they work out what capital gains tax they owe. 

Steven Mnuchin, the US treasury secretary, said in a recent interview that officials were looking at whether the change could be achieved through regulation rather than legislation, according to The New York Times.  Such a move would mean Congress would be bypassed. 

Capital gains tax is usually levied around 20 per cent for Americans and is paid on assets, such as property or stocks, when they are sold. 

Under the current system, the tax is paid on the difference between the original purchase price and the new sale price. 

Under Mr Mnuchin's idea, the original price would be adjusted for inflation – dramatically reducing the amount which would be hit by the tax. 

The change, according to estimates cited in The New York Times, could result in a tax cut worth $100 billion and would disproportionately benefit wealthy Americans, who own more assets. 

The paper said Mr Mnuchin had discussed the idea on the sidelines of the Group of 20 summit meeting in Argentina this month. 

He was quoted as saying: “If it can’t get done through a legislation process, we will look at what tools at Treasury we have to do it on our own and we’ll consider that

“We are studying that internally, and we are also studying the economic costs and the impact on growth.”

Chuck Schumer holds the post of Senate Minority Leader, making him the most senior Democrat in the US Senate.  - Credit: Andrew Harrer/Bloomberg Chuck Schumer holds the post of Senate Minority Leader, making him the most senior Democrat in the US Senate.  Credit: Andrew Harrer/Bloomberg

Democrats criticised the suggestion that such a change could be adopted without full legislation going through Congress. 

Chuck Schumer, the most senior Democrat senator, said: “At a time when the deficit is out of control, wages are flat and the wealthiest are doing better than ever, to give the top 1 percent another advantage is an outrage and shows the Republicans’ true colours.

“Furthermore, Mr Mnuchin thinks he can do it on his own, but everyone knows this must be done by legislation.”

George Bush reportedly considered the move while president in 1992 but rejected it after concluding the Treasury Department did not have the power to make the change on its own. 

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Capital Gains Taxes affect millions....AND NOT JUST THE WEALTHY!!!! Why SCARE folks?

Edited by caz1104

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The top 1 percent also PAY the most taxes!!! Flat Tax.....problem solved. Of course the left would then alienate a major voting block if a Flat Tax was instituted.....eeee gads ...can't do that

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